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Foreign Direct Investment

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Direct investment in Ireland increased by €64.4bn in Q2 2020

InflowsOutflows
Q1 20184.63819.697
Q2 20186.10218.574
Q3 20186.61621.085
Q4 20184.09820.213
Q1 20195.20822.87
Q2 20194.77622.605
Q3 20195.89724.045
Q4 20194.82922.265
Q1 20206.15423.505
Q2 20202.73821.015

Direct investment income outflows (earned on investments in Ireland by investors located abroad) were €21bn in the second quarter of 2020, a decrease of €2.5bn compared with the first quarter of 2020. This decrease was mostly caused by a decline in income outflows in manufacturing. Direct investment income inflows, which represent income earned abroad by investors located in Ireland, were €2.7bn in the second quarter of 2020, down €3.4bn compared to the first period of 2020. This decrease in FDI income inflows is mainly due to decreases from the redomiciled PLCs.

Income on Debt OutflowsReinvested Earning OutflowsDividends & Distributed Branch Profits Outflows
Q1 20181.91410.8786.905
Q2 20182.13813.2683.169
Q3 20182.30914.064.715
Q4 20182.54313.4974.173
Q1 20192.16610.16210.543
Q2 20192.25718.7661.582
Q3 20192.53418.6642.847
Q4 20192.50315.2534.509
Q1 20202.269.84411.401
Q2 20202.42117.0491.545

The composition of direct investment income outflows is presented in Figure 4.2. Income outflows on reinvested earnings were €17bn in the second quarter of 2020, with dividends & distributed branch profits outflows at €1.5bn and income on debt outflows at €2.4bn. Income outflows on reinvested earnings have increased by €7.2bn from the first quarter of 2020 while dividends & distributed branch profits outflows have decreased by €9.9bn. These large increases and decreases in the series were caused by a classification of funds from reinvested earnings which qualified as dividends in the first quarter of 2020.

Direct Investment Income Outflowsof which Manufacturingof which Information and Communications
Q1 201819.69711.3993.613
Q2 201818.57410.672.717
Q3 201821.08512.6093.43
Q4 201820.21311.5553.265
Q1 201922.8714.4693.628
Q2 201922.60510.0646.168
Q3 201924.04514.852.885
Q4 201922.26512.513.853
Q1 202023.50514.9254.313
Q2 202021.01513.3834.355

Figure 4.3 illustrates a breakdown of direct investment income outflows between two sectors, manufacturing and information and communications. Of the €21bn in direct investment income outflows for the second quarter of 2020, €13.4bn can be attributed to the manufacturing sector and €4.4bn to the information and communications sector. The level of manufacturing direct investment income outflows has decreased by €1.5bn from the first quarter of 2020. The information and communications sector direct investment income outflows are up slightly by €42m from the first quarter of 2020.

AbroadIn Ireland
Q1 2018-1.781-18.521
Q2 2018-34.574-46.009
Q3 20185.681-9.525
Q4 201838.8260.425
Q1 20198.1312.01
Q2 2019-60.549-4.229
Q3 201927.79633.194
Q4 20199.76441.473
Q1 2020-10.6264.076
Q2 2020-2.9264.428

Foreign direct investment (FDI) transactions abroad and in Ireland are shown in Figure 4.4. Direct investment into Ireland increased by €64.4bn in the second quarter of 2020. Direct investment abroad decreased by €2.9bn in the quarter. The large increase in FDI transactions in to Ireland for the second quarter of 2020 pertains to the funding of mergers and acquisitions.

AbroadIn Ireland
Q1 2018794.492877.222
Q2 2018831.627858.473
Q3 2018881.549831.389
Q4 2018845.336915.849
Q1 2019896.385966.725
Q2 2019863.272950.712
Q3 2019940.4321004.385
Q4 2019966.6411025.789
Q1 2020933.9511038.284
Q2 2020908.6041096.582

The stock of FDI assets held abroad decreased from €934.0bn in Q1 2020 to €908.6bn in Q2 2020, while the stock of FDI assets held in Ireland increased from €1,038.3bn in Q1 2020 to €1,096.6bn in Q2 2020.

Net Direct Investment IncomeAll Other Current Account ComponentsCurrent Account Balance
Q1 2018-15.05926.22211.163
Q2 2018-12.47223.26810.795
Q3 2018-14.46925.48511.016
Q4 2018-16.1152.758-13.357
Q1 2019-17.66226.8159.153
Q2 2019-17.829-14.773-32.602
Q3 2019-18.14829.75711.609
Q4 2019-17.436-11.129-28.564
Q1 2020-17.3512.794-14.557
Q2 2020-18.27729.93911.663

The impact of foreign direct investment income on the current account balance is shown in Figure 4.6. In Q2 2020 net direct investment income (FDI income inflows less FDI income outflows) was -€18.3bn while the net of all other current account components (trade in merchandise, services and other income) stood at €29.9bn. The resultant balance was a current account surplus of €11.7bn.

Net Direct Investment TransactionsAll Other Financial Account ComponentsFinancial Account Balance
Q1 201816.74-14.3412.399
Q2 201811.4353.74815.181
Q3 201815.206-7.0368.17
Q4 2018-21.605-36.308-57.913
Q1 20196.1215.17111.291
Q2 2019-56.32-0.434-56.754
Q3 2019-5.39810.1934.795
Q4 2019-31.7096.068-25.641
Q1 2020-14.702-9.436-24.138
Q2 2020-67.34865.32-2.027

The impact of direct investment transactions on the financial account balance is shown in Figure 4.7. In Q2 2020 there was net negative flows of -€67.3bn in foreign direct investment transactions while the net contribution from other financial account components (portfolio investment, other investment and reserve assets) was €65.3bn. This contributed to a financial account deficit of €2.0bn.

Net Direct Investment PositionAll Other Net IIP ComponentsNet IIP
Q1 2018-82.73-447.291-530.021
Q2 2018-26.846-489.081-515.928
Q3 201850.16-548.458-498.298
Q4 2018-70.513-520.273-590.787
Q1 2019-70.34-502.33-572.671
Q2 2019-87.44-515.66-603.1
Q3 2019-63.953-544.811-608.764
Q4 2019-59.148-559.635-618.782
Q1 2020-104.333-534.819-639.152
Q2 2020-187.978-445.748-633.726

The net stock of foreign direct investment assets in the net international investment position (IIP) is shown in Figure 4.8. In Q2 2020 there was a net direct investment position of -€188bn. Other net IIP components (portfolio investment, other investment and reserve assets) accounted for -€445.7bn. The overall net IIP balance is -€633.7bn.

Direct Investment Position Abroad (left axis)Direct Investment Position In Ireland (left axis)Return on FDI Abroad (right axis)Return on FDI in Ireland (right axis)
Q1 2018794.492877.2222.668245872834478.47447966421271
Q2 2018831.627858.4732.741493482053858.74424705261552
Q3 2018881.549831.3892.714199664454279.4853311746968
Q4 2018845.336915.8492.53792574786838.6880042452413
Q1 2019896.385966.7252.456979980700268.55900074995474
Q2 2019863.272950.7122.397622070448259.12715943419248
Q3 2019940.4321004.3852.124449189308748.93412386684389
Q4 2019966.6411025.7892.14247067939398.9477465638645
Q1 2020933.9511038.2842.318751197867988.90122548358638
Q2 2020908.6041096.5822.159136433473778.28301029927539

The rate of return on FDI investment in Ireland and abroad alongside the stock of FDI assets held in Ireland and abroad is presented in Figure 4.9. The return on investments in Ireland is significantly higher than the return on investments made abroad. In Q2 2020 the rate of return on FDI investment in Ireland was 8.3% compared to 2.2% on FDI investment abroad.


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